TAIPEI – Foxconn on Thursday predicts a significant increase in revenue for the third quarter as the world's largest iPhone manufacturer said it was the first time making more money from the AI server business from Smart Electronics.
The company says its AI server revenue is expected to jump more than 170% year-on-year in the coming quarter, but it also warns of uncertainty from US tariffs.
Nvidia's largest server maker, Apple's top iPhone assembler is riding the data center boom as cloud computing companies such as Amazon, Microsoft, and Google from Alphabet are spending billions of dollars to expand their AI infrastructure and research capabilities.
Cloud and networking products, including servers, accounted for 41% of second quarter revenue, while smart consumer products accounted for 35%.
As Foxconn expects a slight decline in revenue from smart consumer electronics, its contribution from the server business to its revenue is set to grow further this quarter. Some experts expect iPhone sales to slow down after a surge in the June quarter ahead of the expected imposition of US tariffs.
“AI has been a major growth driver so far this year,” Kathy Yang, who spins Foxconn CEO, said in a call with media and analysts. However, she warned that “the effects of tariffs and exchange rate changes require extreme caution.”
The company said Thursday that capital expenditures will rise by more than 20% this year as it plans to increase server capacity at its Texas and Wisconsin manufacturing sites.
Global trade uncertainty, particularly the trade zone between the US and China, could bleak this year as it has a major manufacturing presence in China this year, but Washington and Beijing extended the tariff ceasefire for another 90 days.
Most iPhones Foxconn makes for Apple are assembled in China, but the majority of those sold in the US are currently produced in India. The company also builds factories in Mexico and Texas and manufactures NVIDIA AI servers.
Road Town sold
Foxconn is also looking to expand the footprint of its electric vehicle. This is what the company considers as a major growth generator of the future, but it's not always going smoothly.
Earlier this month, Foxconn said it had signed a contract to sell a former car factory in Roadtown, Ohio.
However, the facility will continue to occupy. The company said the Ohio plant will be used to manufacture cloud-related products.
Foxconn said that initial production will be in Taiwan, but the goal of producing Model C EVs for the US market remains unchanged.
A source familiar with the issue told Reuters that the factory was sold to partner SoftBank. Foxconn and SoftBank declined to comment.
Overall, the company reported net profit of $44.4 billion ($1.48 billion) from April to June. This was reported higher than the consensus estimate of T$38.8 billion compiled by LSEG.
Officially, Foxconn of Hon Hai Precision Industry reported record second quarter revenue last month on strong demand for AI products, but warned of geopolitical and exchange rate headwinds.
Stocks have so far rise 8.4% this year, surpassing the 2% profit of the broader Taiwan index. They closed 0.5% on Thursday ahead of the revenue release.
(Reporting by Wen-yee Lee and Faith Hung; Additional reporting by Sam Nussey of Tokyo; Editing by Ben Blanchard, Christian Schmollinger, Mark Potter, Joe Bavier, and Jan Harvey)
